Options Trader: Thursday Outlook

All right, we are up nicely in pre-markets!

Mostly we can thank better-than-expected retail sales led by Walmart (WMT) with is 3.9% jump in same store sales - and that’s excluding fuel.  WMT had forecast 2% so these numbers even surprised them, and they are pretty good forecasters!  Costco (COST) was up 9% with a 15% gain in International sales and 7% in the US and BJ's Wholesale Club (BJ) jumped 13%.  Non-discount retailers were up about 0.9% on average but we’ll take what we can get right now and this is as good an excuse as any to rally the markets ahead of tomorrow’s jobs numbers.

Continental Airlines (CAL) (who we cut and ran from yesterday) announced that they will be joining other airlines and reducing domestic departures by 16%, eliminating 3,000 jobs.  As with the other airlines, CAL will be retiring gas-guzzling 737-300s and 500s with 67 planes being taken out of service.  These will eventually be replaced by 787s but, shhhhh, don’t tell Boeing (BA) investors that, they think the company is worthless…

We’ve been buybuybuying BA on the dip and we are starting to feel silly about it as they plow through $80 all the way to $77.50 but we took out our callers yesterday and we’ll see what happens.  Just yesterday BA took orders from Korean Air (KRNRF.PK), Hawaiian Airlines (HA) and Romania’s Blue Air but you guys go ahead and drive the p/e below 10 on a company with an order backlog of $364Bn with the whole market cap of the company down to $58Bn.  The stock is down a neat 27.5% from last year’s high at $107.80, AND THAT WAS WHEN WE THOUGH AIRBUS WAS A COMPETITOR! 

Paul Price has two excellent option plays over at Seeking Alpha re Boeing, and they are great for the cautious investor.  Our members have taken some decidedly less cautious trades but trades like Paul’s are excellent for long-term investors looking to make solid returns.  For ourselves, the June $80s have turned a little risky (tick, tock) but the July $80s are looking good at $2.25.

Asia was mixed up again this morning,  this time with the Hang Seng up (barely) 0.5% and the Nikkkei down (barely) 0.6%.  Much like our market yesterday, they could have just taken the day off and saved the commissions.  China got a 5.3 aftershock to their quake but it was oil companies that dragged down the Nikkei as well as brokers, in a near mirror of yesterday’s US action.  Our pals at Sinopec Shanghai Petrochemical (SHI) jumped 5% as Chinese traders were smart enough to figure out that a refiner might do better with lower oil and still-high gas prices.

Europe is not so excited even though the ECB and the BOE held rates steady, which is a real boost for the dollar.  UK house prices took another sharp tumble, dropping 2.4% in May, the worst since April 1993 and quite a bit more than the 1% forecast by economists who didn’t read my column on this subject last week. "The decline in prices is caused by the difficulties created for potential house purchasers by the rapid rise in house prices in the last few years, a squeeze on spending power and the reduction in credit availability," Halifax chief economist Martin Ellis said in a statement.  "However one tries to cut the current set of house price data, the message is clear — the decline in prices is at risk of turning into a rout," Malcolm Barr, U.K economist at J.P. Morgan Chase Bank, said in a research note.

We need to hold our levels today:  Dow 12,450, S&P 1,385 and Nasdaq 2,500.  If the Nasdaq fails 2,475 we have serious problems but any kind of positive day is all we can hope for in this choppy market.  Oil must stay below $125 as well.

Comments

[aquaculture:]

youtube.com/watch?v=Sd...

2008 Jun 05 10:40 AM

[Commodity B...:]

Phil,

I'm a little bit confused. Help me out here.

Jim Rogers (one of my favorite commodity perma bulls b/c of the bowtie that makes him look like pee-wee herman) is on the rampage about how oil's record run is years away from ending. Ok typical bs out of that guy.

But literally in the next sentence, this dorkhead then said that he's purchasing airline stocks all over the world because they can't go down any farther since they are basically bankrupt.

www.bloomberg.com/apps...


Now, I'm a little bit of an amateur market watcher but how in the hell is the airline industry supposed to survive in an oil market that goes up up and up forever??? If $125 oil is a crisis to the airline industry, what do you think 200 or 300 dollar oil would do to it?

The bullshit train just keeps going

BTW...since all of the developing world economies can afford oil at $125 as the oil bulls so proudly complain, then why is Pakistan buying oil on a deferred payment plan?

www.bloomberg.com/apps...

2008 Jun 06 12:58 AM

[damon1leo:]

Hey Davis, How are the July $80 calls looking now at $1 ?

2008 Jun 08 08:26 AM